Macquarie goes up the risk curve with new infra debt strategy

MIDIS’s sub-investment grade infra debt fund is already roughly 60% invested in 14 borrowers in the US, UK and continental Europe with an average internal rating of BB-.

Macquarie Infrastructure Debt Investment Solutions has tapped into institutional investors’ appetite for the asset class, this time offering a new strategy in the form of a recently launched vehicle that invests in sub-investment grade infrastructure debt.

The London-based firm said in a statement that its infrastructure debt asset management arm had raised approximately €730 million via the Macquarie Infrastructure Debt (Sub-Investment Grade) Fund, thereby exceeding the vehicle’s initial €500 million target. It raised an additional €425 million to invest alongside the fund through separately managed accounts or co-investments, bringing the total for this strategy to roughly €1.2 billion.

In its statement, the firm said: “Institutional investors have increased their allocations to sub-investment grade infrastructure debt in recent years, recognizing the typically stable nature of infrastructure asset revenue streams and strong protections in place for lenders when compared with similarly rated corporate debt.”

MIDIS’s existing clients, as well as new investors, committed to the fund, which PDI‘s sister title Infrastructure Investor understands reached a final close in less than 18 months. The commitments came from pensions, insurers and sovereign wealth funds from the UK, South Korea, Japan, Italy and Portugal.

According to the statement, the fund has already invested in 14 “high-quality borrowers” in the UK, the US, Italy, Finland and the Netherlands, with an average internal rating of BB-.

The firm did not disclose in which sectors investments have been made to date. However, a source told Infrastructure Investor that the fund is targeting the energy, renewables, utilities and transport sectors and is roughly 60 percent deployed.

Although the fund is euro-denominated, it features a Europe-focused sleeve and a global sleeve, though the latter is understood to be more US-focused.

This is the third debt fund MIDIS has closed this year. In March it raised $645 million for the Macquarie Global Infrastructure Debt Fund and in June it raised £220 million ($285 million; €243 million) for the blind pool Macquarie Infrastructure Debt (UK Inflation Linked) Fund 2. An additional £2.5 billion will be invested alongside the fund through separately managed accounts.

Macquarie declined to comment for this story.